Thursday, December 22, 2011

Leading Economic Index Points to Ongoing Growth

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.5 percent in November to 118.0, following a 0.9 percent increase in October, and a 0.1 percent increase in September (see chart above).

Says Ataman Ozyildirim, economist at The Conference Board: “November’s increase in the LEI for the U.S. was widespread among the leading indicators and continues to suggest that the risk of an economic downturn in the near term has receded. Interest rate spread and housing permits made the largest contributions to the LEI this month, overcoming a falling average workweek in manufacturing, which reversed its October gain. The CEI also rose on improving employment and personal income although industrial production fell in November.”

Says Ken Goldstein, economist at The Conference Board: “The LEI is pointing to continued growth this winter, possibly even gaining momentum by spring. For the second month in a row, building permits made a relatively strong contribution and there is a chance that the long decline in housing is finally slowing. However, this somewhat positive outlook for the domestic economy is at odds with a global economy that appears to be losing steam. In particular, a deeper-than-expected recession in Europe could easily derail the outlook for the U.S. economy.”

MP: The LEI has now increased in 31 out of the last 32 months going back to April 2009 as the recession was ending, and suggests that the economic expansion will continue through next year, with almost no chance of any kind of pending double-dip recession. The rebound in the building permits component of the LEI lends support to the idea that the turning point in construction has finally arrived and will start making a larger contribution to the economic recovery moving forward.

"Obama did indeed start showering America with cargo — free wealth in the form of bailouts, stimulus packages, more food stamps and welfare, free health care, and so on. But unlike the Tannans who didn’t question where all this stuff might be coming from, Americans dared to peek behind the curtain, and discovered to our horror that the cargo Obama was doling out didn’t come from heaven, it came from . . . us! We certainly were the ones we had been waiting for, but not quite in the way we envisioned. Obama was smashing open our piggy banks and our grandkids’ piggy banks, then making a big show out of handing us back our own money (minus expenses, of course), as if it was cargo from on high. ..." -- "Barry O, He Go: the Cargo Cult Presidency of Barack Obama", PJ Media

we focus entirely on microcap special situations, so each investment has a specific, idiosyncratic set of catalysts that we believe will create/reveal value.

we like to keep a close eye on the economy, but it's rarely a key factor in the success of our investments.

our biggest winners this year have been a drug company that entered the MS and NS markets with an existing product that did not require approval and a leasing company that rents 3d seismic equipment to oil and gas exploration companies. we tend to look very closely at new markets and product cycles and do a lot of due diligence speaking to customers, distributors, competitors, etc.

we tend not to speak publicly about our specific investment ideas, so, i'm sorry, but i can't really lay out what we are buying now.

buddy-

that's correct. operation twist has them moving to longer maturities, driving yields down and the spread w/ ff rate from 2.08 to 1.93.